To build an outsourcing strategy for some products at akzonobel paints Vietnam

TO BUILD AN OUTSOURCING STRATEGY FOR
SOME PRODUCTS AT AKZONOBEL PAINTS
VIETNAM (A.N.C)
CAPSTONE PROJECT REPORT
Ho Chi Minh City, 2011


Group No.: 8
 TRAN DUY HOANG
 TRAN DUC DIEN
 VU CHI KIEN
 DIEN XUAN DUNG

Class: GaMBA01.N05
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TO BUILD AN OUTSOURCING STRATEGY FOR SOME PRODUCTS AT

AKZONOBEL PAINTS VIETNAM


GROUP 8:
Tran Duy Hoang: Team leader
Tran Duc Dien: Member
Vu Chi Kien: Member
Dien Xuan Dung: Member

INTRODUCTION. 6
1. Thesis title. 6
2. The reason for choosing this topic/background analysis. 6
3. The objective of the report 6
4. Scope of study 6
5. Study Methodology 7
6. Significance of the report 7
7. Report expectation 8
8. The thesis structure 8
CHAPTER I – THEORETICAL BASIS 9
1.1. Concepts, requirements and content of the Outsourcing strategy step process 9
1.2. Vision, mission and strategic goals of the Company 11
1.3. External environment analysis 12
1.3.1. Analysis of macro business environment (Pest) 12

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1.3.2. Analysis of Industry environment as per Michael Porter (5 resources) 13
1.3.3. Analysis of competitive environment 16

1.4. Analysis of the enterprise environment 16
1.5. SWOT Matrix 17
1.6. Business strategy 19
CHAPTER II – TO BUILD THE OUTSOURCING STRATEGY AT AKZONOBEL
PAINTS VIET NAM (AKZONOBEL VN) 23
2.1. Overview of Akzonobel Paints Vietnam Ltd. 23
2.1.1. About Akzonobel Paints Vietnam Ltd. 23
2.1.2. The formation and development 23
2.1.3. Field of operations 24
2.1.4. The main products 24
2.1.5. Organizational Structure 24
2.2. Recent business performance 25
2.3. Mission, core value and strategic goals of Akzonobel Paints Vietnam Ltd. 26
2.3.1. Mission 26
2.3.2. Core value 26
2.3.3. Strategic goals……………………………………………………………28

2.4. External environment analysis 28
2.4.1. Macro environment analysis for Akzonobel Paints Vietnam Ltd. (Pest) 28
2.4.1.1. Economic environment impacts 28
2.4.1.2. Political and legal environment impacts 29
2.4.1.3. Cultural and social environment impacts 30
2 .4.1.4. Demographical environment impacts 30
2.4.1.5. Technological environment impacts 31
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2.4.2. Industry environment analysis of decorative paints (5 forces of Poster) 31
2.4.2.1. An analysis of potential rivals. 32
2.4.2.2. An analysis of customer pressure 32
2.4.2.3. An analysis of potential alternate products 33

2.4.2.4. An analysis of supplier pressure 33
2.4.2.5. An analysis of potential rival pressure 35
2.5. Internal environment analysis of Akzonobel Paints Vietnam Ltd. 35
2.5.1. An analysis of marketing competence 35
2.5.2. An analysis of management competence 37
2.5.3. An analysis of financial capability 37
2.5.4. An analysis of human resources 38
2.5.5. An analysis of employed technologies 39
2.5.6. An analysis of the communication system 40
2.6. SWOT analysis for Akzonobel Paints Vietnam Ltd. 41
2.6.1. Strength 41
2.6.2. Weaknesses 42
2.6.3. Opportunities 42
2.6.4. Threat 43
2.7. Analysis for the Outsourcing strategy 45
2.8. Analysis for the choosing of products will be outsourced 46
CHAPTER III – SOLUTIONS, RECOMMENDATION AND CONCLUSIONS 48
3.1. Building long term strategic objective 48
3.2. Solution for outsourcing strategic implementation 48
3.3. Proposals/Suggestions 52
3.4. Conclusion 53
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ANNEX 55
LIST OF TABLES
Table 1-1: SWOT matrix…………………………………………………………….18
Table 2-1: Company production and revenue over the past few years………………26
Table 2-2: Company growth rate over the past few years……………………………29
Table 2-3: Population density in cities and mountainous areas…………………… 30
Table 2-4: Population density by region…………………………………………….30

Table 2-5: Formula of a paint product……………………………………………….33
Table 2-6: Advertisement costs over the past few years…………………………… 35
Table 2-7: The group revenue in 2008……………………………………………….38
Table 2-8: Production of the factory in Binh Duong province………………………40
Table 2-9: SWOT of Akzonobel Paints Vietnam Ltd……………………………….43
Table 3-1: Sale records of the North…………………………………………………48

LIST OF FIGURES
Figure 1-1: Steps in developing the strategy………………………………………….8
Figure 1-2: M. Porter model of five forces……………………………………………14
Figure 1-3: Procedure for identifying sustainable competitiveness………………….17
Figure 2-1: Company organizational chart……………………………………………24
Figure 2-2: Outsourcing division organizational chart……………………………….25
Figure 2-3: Marketing division organizational chart…………………………………36
Figure 2-4: Bath-based traditional paint production procedure………………………39
Figure 2-5: IT division organizational chart………………………………………….41
Figure 3-1: Outsourcing Model………………………………………………………57

LIST OF ABBREVIATIONS

SWOT matrix: Strength, weakness, opportunities, threat.
Akzonbel Vietnam: Akzonobel Paints Vietnam Ltd.
EBITDA: Earning Before Interest, Taxes, Depreciation, and Amortization.
OWC: Operating Working Capital.
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HSE&S: Health, Safety, Environment & Security.
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INTRODUCTION

1. The title of the Project:
Development of an outsourcing strategy for some products at AkzoNobel Paints
Vietnam Ltd.

2. The reason for choosing this topic/background analysis.
Based on the actual need and situation of AkzoNobel Paint Vietnam Co., Ltd.:
 Limited supply to meet the market demand for paint and putty powder,
particularly in the northern Vietnam where the company has no factory. By using
outsourcing services, the company shall be able to meet the customers demand at
the soonest and reduce the cost transporting products from the south to the north
given strongly increasing gasoline and electricity price recently.
 Product development strategy taken by the company and the AkzoNobel Global in
general is prioritizing the development of environmentally friendly product lines.
Therefore, solvent bourn paints and putty powder shall not be prioritized by the
company. Thus, the outsourcing of these products would be appropriate and
necessary for the time being.
From the above discussions, the company management has attached special
importance to the assessment of feasibility and development of a detailed and
comprehensive outsourcing strategy.
3. The objective of the report
From the above requirement, the objective of this thesis is to study and develop an
outsourcing strategy for some product lines by an external party. Two main objectives of
the thesis include:
 To assess and evaluate the efficiency/feasibility of the outsourcing strategy.
 To develop a complete outsourcing strategy and apply it into reality.
4. Scope of study
This is a highly practical study. However, it only focuses on the company internal
side.
 Study period: from 2010 to 2013 and can be extended till 2015 by basing on the
actual situation (if volume is not big enough to build a new plant in North).

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 Spatial boundary: AkzoNobel Paint Vietnam Co., Ltd.
 Target groups of the study: Due to time constraint, the objective of the study and
data and information availability is limited. Therefore, the study only focuses on
some key issues such as environmental macro-analysis, sector environmental
analysis, and company internal environmental analysis, which serve as the basis
for developing a complete outsourcing strategy for some product lines of the
company.
5. Study methodology
 Data and information collection
- Primary data is collected by actual observations at the factory based in My Phuoc
Industrial Park, Binh Duong province, interviews with the management and
employees and workers, etc.
- Primary data is consolidated from the company reports and other references,
including, books, newspapers, and reviews, etc.
 Data processing method
- Comparison, analysis and consolidation: data from annual reports is compared,
analyzed and consolidated to give comments.
- Statistics: to make inventory of tables and data to come to a conclusion and forecast
possible trends to assess the company operations.
- Expert knowledge: to consult with experts involved in paint production industry.
- SWOT: is a technique to analyze and process the business operations by combining
strengths and weaknesses, risk and opportunities to propose a proper strategy.
6. Significance of the report
In the world, outsourcing is a trend which is currently used by many companies,
particularly national corporations, namely Unilever, Nike, and Idemitsu, etc.
Therefore, the study of an outsourcing strategy for AkzoNobel Paint Vietnam Co., Ltd.
shall be of great significance. It will help to reduce production cost, meet customer
requirements in a prompt and most sufficient way (OTIF), and minimize some HSES

related risks.


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7. Report expectation
Given the time constraint, the thesis expectations are quite limited. Group 8 wishes to
address the following issues:
 To assess the effectiveness of the outsourcing strategy.
 To establish a detailed outsourcing model, covering the assessment of contractors
and until the contract completion.
 To assess the contractors after outsourcing assignment.

8. Thesis structure
Exclusive of the introduction and conclusion, the thesis is comprised of 3 chapters:
Chapter 1: Legal basis
Chapter 2: To establish an outsourcing strategy for Akzonobel Paint Vietnam Co.,
Ltd.
Chapter 3: Solutions, recommendations and conclusion

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CHAPTER I
THEORETICAL BASIS
1.1. Concepts, requirements and content of the Outsourcing strategy step process
Any company/organization shall need a proper business strategy. This is a step
towards establishing sub-strategies which shall all serve that company/organization
business strategy. And the “product outsourcing by an external party” shall not be an
exception.
 Definition:
There are many definitions of “business strategy”. Nevertheless, the term “business
strategy” has been commonly used and accessed by different scholars. Business strategy
is considered as an art or a kind of planning (like Alain Threalart, G. Arlleret, and D.
Bizrell, etc.). However, one definition that has received a lot of agreement is: “Business
strategy is a collection of objectives and policies and plans which are set to obtain the
above said objectives, and clearly reflect what business the company is and shall be
doing and in what business areas”.
 Strategy level
The strategy is planned at various levels, yet, it still has a close interlink. The
strategies of different divisions shall differ from each other, but sharing one goal of
serving the company/organization overall strategy. In any organization, strategies exist at
various levels – covering the whole organization (or a group of enterprises) and even
individuals working inside it.

Company strategy: is the strategy that mentions the whole company. Company
strategy largely talks about its list of products and diversifications of these products in
order to take full advantage of the company spearheads. In other word, the company
strategy question would go like: “In what aspect should an organization compete?”
Business strategy: or the so-called product strategy or competition strategy
because an enterprise would compete in the market in with regards to individual product
only. Business strategy for each product type needs to answer such questions as: What
are the objectives to be achieved? What is the competitiveness needed to obtain such
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objectives? Who are potential key rivals?. Central to a business strategy is to identify and
enhance organization competitiveness in the concerned market.
Functional strategy: Functional strategies such as marketing, finance and human
resources management, etc. need to be combined to enhance competitiveness for the
business strategy. The key point of functional strategies is to specify value added that can
be given to customers as well to strategies at higher levels.
Global strategy (international business): is the choice of heading towards
international business issues when a company is to diversify and upholder its operations
to outside the country.
 Major characteristics of a business strategy
Business strategy specifies basic objectives and operation directions of an
organization over a specific time period.
The strategy orientation functionality shall help an organization to continuously
develop and stand firm in its fluctuating business environment.
Business strategy shall ensure the maximum mobilization and combination of the
exploitation and utilization of organization available and future resources, making use of
advantages and opportunities in its competition race.
An organization business strategy is reflected in a closed and continuous process.
Business strategy tends to be moving forwards and winning in any business
playground.

Business strategy is often built up within a long time period (3, 5, or 10 years).
 Business strategy role
Business strategy helps an enterprise to be aware of its objectives and orientations,
which function as a guide to its production and operation activities.
Business strategy helps an enterprise to capture and take advantage of business
opportunities and at the same time take necessary actions to overcome any threats and/or
risks in the market.
Business strategy contributes to improving the efficiency of resources utilization,
enhancing company competitiveness and ensures its sustainable business and operational
development.
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Business strategy creates firm bases for policy makers to issue policies and
decisions in a timely accordance with the market situation.
 Strategy development procedure
Strategy development flowchart:

Figure 1.1: Strategy development procedure

1.2. Vision, mission and strategic goals of the Company
The vision here refers to business orientations in future of the company. In
identifying the vision, a company is answering the question: “where will we go?” The
answers include markets that they are pursuing, future focus on technology-product-
customer and lastly type of company that the management is attempting to create and drive
towards.
Duty reflects important duties of a company with concerned business environment
and normally demonstrated in its philosophy.
Functions, duties & objectives of t company
strategy (1)
Internal analysis (S,W) (3)
Business environment
analysis (O, T) (2)
Choice of strategy (4)

Company level strategy (5)

Business strategy, business units and
functional departments
Strategy implementation (6)
Operation review and evaluation (7)
Feedback

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Objective is the desired final result that a company is attempting to attain. An

objective indicates the orientations for all decisions and forms measurement standards for
actual implementation and monitoring.

1.3. External environment analysis
External environment includes all the factors located outside a company that
managers could not control but they have significant impacts on the implementation of its
objectives, on its growth and profit generation. External environment analysis covers the
analysis of macro and sectoral (micro) environments. Analyzing these factors shall
enable a company to locate itself in the market and business environment characteristics,
its era and to shape external environment impacts on its organization. Thereby, a
company shall make proper decisions during its strategy development process.
1.3.1. Analysis of macro business environment (Pest)
Changes in macro environment may directly impact any forces in the sector, the
relative strengths of the forces and the attractiveness of a sector. Macro environment
includes 5 sections: economy, technology, culture and society, demography and legal
framework.
 Economic environment
The status of the macroeconomic environment reflects the health, prosperity of an
economy where it always has impacts on enterprises and the sector. Economic
environment indicates the nature and orientations of an economy within which the
organization is operating. Economy impacts on a company may include the change to
value and income generation. Four major components of a macro economy are: economic
growth rate, interest rate, exchange rate and inflation rate.
 Political and legal environment
A change in political and legal environment shall significantly influence a
company business strategy implementation. In fact, companies who invest in a region or
across countries, they would pay attention to political environment, their impacts on the
local government and vice versa. In doing such political and legal environment analysis,
it is necessary to take into account such factors as economic reform, administrative
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reform, changes to sectoral regulations, taxation policies, safety and environmental
protection, and the issuance and revision of existing laws and regulations.
 Social and culture environment
This includes social behavior and cultural values which create both opportunities
and threats. A company wishing to coexist with the time, partners and being socially
accepted will have to respect cultural values in doing business. Cultural and social values
form the basis of a society; therefore it normally directs the changes related to
technologies, politics, laws, economy and demography.
 Demographical environment
This environment covers issues related to population, age structure, geographical
distribution, communities and income distribution. Consumption of commodities and
services by residents in different locations and gender, age and occupation based
consumption would affect the formation of markets and business strategy. Life style
influences demand for goods and services, including types, quality, shape and outward
appearance and. Population growth has positive impacts on the business strategy of a
company.
 Science and technology environment
Technological changes affect a large section of the society. Main impacts are through
technological products, including physical factors, activities related to generation of new
knowledge, transformation of such knowledge into outputs, products, processes and new
material. Technology environment changes would bring about a company both
opportunities and challenges. Opportunities would be improved competence in producing
new products with better competitiveness while the challenges could be direct or indirect
undermining of a product lifecycle. One key impact of technological changes includes
impacts on the barrier magnitude and the shaping of the sectoral structure.

1.3.2. Analysis of industry environment as per Michael Porter (5 resources)
A sector is defined as a group of enterprises supplying products or services which
can be closely alternated to each other. A close alternation means such products or

services can basically satisfy customers to a similar extent.
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Sectoral analysis and competition are a set of viewpoints and techniques used to
clarify issues related to:
+ Major economic characteristics of the sector.
+ Rivals present within the sector and nature and strengths of each rivals.
+ Driving forces rendering changes to the sector and their potential impacts.
+ Who is the one creating intermediate services in the industry.
+ Key factors to the success or failure of the sector.
+ Attractiveness of the sector in terms of average profit generation.
Sectoral environment is primarily affected by the followings:
According to M. Porter, there five driving forces to competition in the sector as
below:
(1) Likelihood of new company enrollment to the sector;
(2) Level of competition among existing companies in the sector;
(3) Negotiation strength of buyers;
(4) Negotiation strength of sellers;
(5) Threats from alternate product.
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Figure 1.2: Five competitive driving forces of M. Porter
 Risk of new company enrollment to the sector:
In appealing markets, new rivals will appear in near future. Although at present,
they have not in place, strategists need to foresee this likelihood because these rivals
often appear late but have abundant resources and a lot of experience. They would
compete with existing companies in the following aspects:
 Struggle for the market share by various means
 Compete in buying input material with existing companies by more flexible and

attractive policies.
 Lure skilled and qualified laborers by appealing incentives.
 Negotiation strength of customers:
Buyers are considered as a threat when they in a good position to request for better
price or better services: Negotiation position, number of buyers, information access to
buyers, characteristics of goods, sensitivity to price, product differentiation, customer
Potential rival

Alternate products
Risk of
new
company
enrollment
Threats from
alternate
products/service
s
Customer
Supplier
Negotiation
strength of
supplier
Negotiation
strength of
customer
Existing rival


Competition
intensity

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concentration in the sector, alternate goods availability, customer motivation, vertical
integration as buyers can use would threaten the supply.
 Risk of alternate products:
Products by other sectors can serve customers needs similarly with the concerned
sector. The magnitude of impacts depends on: Cost of transferring product usage,
alternate utilization tendency by customers, correlation between price and quality of
alternate products.
 Negotiation strength of suppliers:
The fourth force in the 5 force model by Porter is the negotiation strength of
suppliers. Suppliers can be considered as a threat when they force to raise the price or
lower quality requirements for products or services they are delivering to the company,
thereby, undermining the company competence in profit generation. On the other hand,
weak suppliers would provide the company with an opportunity to force the price down
while insisting for better quality. Like buyers, supplier supply competence depends in the
relative power between itself and the company.
 Competition intensity in the sector:
Operations in the market driven economy is likely to see competition. This takes place
when a company is challenged by actions by other companies or when another enterprise
realizes an opportunity for them to improve their position in the market. Different tools are
normally used in the race to generate values for customers include price, quality,
products/services identity, distribution, promotion, improvement and customer satisfaction.
The impact magnitude depends on: Sectoral competition structure, needs criteria, barriers to
the withdrawal from the sector, fixed costs per value added, sector growth, capacity
redundancy, product differences, transformation cots, characteristics of product brand name,
diversification of rivals and sectoral screening.

1.3.3. Analysis of the enterprise environment

To be successful, a company shall need to investigate its potential rivals as well as
existing and potential customers. To do so is particularly necessary when market grows
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slowly because consumption can only be achieved by struggling for the market share
from other rivals.
The closest rivals to a company are those attempts to satisfy the same customers and
needs and produce similar products. The company shall pay special attention to silent
rivals who may apply new methods to satisfy the same needs. The company needs to
identify such rivals through sectoral analysis or market based analysis.
The company needs to collect information about strategies, objectives,
strengths/weaknesses and reactions by its potential rivals. It also needs to know the
strategies of each rival to foresee and prepared necessary actions it may need to take in
future. Being aware of rival strengths and/or weaknesses, the company shall perfect its
strategy to prevail on the rival weaknesses and know what are the strengths of the rivals
to avoid unnecessary dig-in. Knowing typical responses by the rivals helps the company
to select and set a proper timeline for its action plan.
Companies need to understand the followings about their rivals:
 Clearly identify their direct rivals.
 Identify and analyze the strategies of their rivals.
 Evaluate the strengths and weaknesses of their rivals.
 Expect possible responses from their rivals.
 Establish a database/information about their rivals.
 Assess the correlation among their rivals.

1.4. Analysis of the enterprise environment
 An analysis of a company resources
A company internal analysis is the study of what belongs to the company directly
or indirectly affecting the company operations with characteristics or the so called
strengths or weaknesses of that company. For the purpose of creating a database for

developing and implementing a business strategy, yet the objects of consideration here is
within the operation and control of the company. Key indicators for internal analysis
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include: marketing, finance-accounting, production capabilities, research and
development, and human resources, etc.
 Identification of a company competitiveness
The procedure for identifying sustainable competitiveness is as below:

Sustainable competitiveness

Much better competence than rivals
Long term enough to become sustainable
Superior competence

When core competence is much better than rivals’,
it becomes superior competence
Core competence

When core competence contributes to success, it becomes
core competence

Competence

Resources are used for production
- Intangible: trademark, commercial advantage, advantageous
position, and R&D
- Tangible: assets and capital
Resources

Infrastructure, personnel, finance and
management, etc.
Figure 1.3: Procedure for indentifying sustainable competitiveness
Company internal analysis is aimed at identifying potential as well as existing resources
that form company competitiveness (strengths); and identifying barriers in sustaining
such competitiveness (weaknesses). Therefore, a proper business strategy can be selected
in order to enhance strengths while address weaknesses existing within the company.

1.5. SWOT Matrix
To build a SWOT matrix, first and foremost, it is necessary to identify
opportunities and/or challenges from the concerned business environment, including
strengths and weaknesses. Next, strengths, weaknesses, opportunities and challenges are
combined into SO, WO, ST, WT and place them properly in the SWOT matrix.
To build the SWOT matrix, an administrator needs to follow 08 steps as below:
Step 1: List down major opportunities from external environment (O1, O2…)
Step 2: List down major challenges from external environment (T1, T2…)




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Step 3: List down major strengths of a company (S1, S2…)
Step 4: List down major aspects of a company (W1, W2…)
Step 5: Combine strengths and opportunities to form proper strategies (SO)
Step 6: Combine weaknesses and opportunities to form proper strategies (WO)
Step 7: Combine strengths and challenges to form proper strategies (SO)
Step 8: Combine weaknesses with challenges for form proper strategies (WT)
Table 1-1: SWOT matrix
SWOT matrix

Opportunities ( O)
O1: List down
opportunities in order of
descending importance
O2:
O3:
Threats ( T)
T1: List down threats in
order of descending
importance
T2:
T3:
Strength ( S)
S1: List down strengths in
order of descending
importance
S2:
S3:
SO strategy
1. Use strengths to explore
opportunities
2.
3.
ST strategy
1. Use strengths to avoid
threats
2.
3.
Weakness ( W)
W1: List down

weaknesses in order of
descending importance
W2:
W3:
WO strategy
1. Limit weaknesses to
explore opportunities
2.
3.
WT strategy
1. Minimize risks and
avoid threats
2.
3.

1.6. Business strategies
 Cost reduction as a strategy
Reducing production cost is a strategy where companies need to have the best
working conditions and strictly control costs to obtain better performance than their
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rivals. In this way, companies need to manage to reduce costs to a minimum extent
incurred from its production.
Following this strategy, companies have to target at obtaining abundant capital
and making full use of its economic advantages. In many cases, companies have to cut
down part of other costs while at the same time spend necessary costs for R&D, focusing
on simplifying processes or production costs.
 Resulting advantages:
+ Given low costs, companies can sell their products at lower price than their
rivals in the same sector. Companies also can avoid consequences of price competition

with their rivals. Meanwhile, they still do easy business and make profit even when input
costs increase.
+ Low price shall attract more low income customers or those customers caring
only about product price. Companies then shall have important advantages in the market.
+ Low price is also considered as one of the tools applied by companies to prevent
competition from alternate products and potential rivals to join the play ground.
 Conditions for reducing production cost:
One of the most important conditions is to do business in a large market. Large
scale production with standardized final products shall contribute to lowering production
cost, lowering price and stimulating consumption.
Another condition would be production and business experience. Thanks to
experience in production, management and sale of final products, companies can improve
and streamline its production processes, thus, enhancing productivity and lowering
production cost.
Production specialization is also another solution to lowering production cost
because then products can be mass produced, and thereby, improving productivity and
reducing costs.
 Challenges in lowering production cost:
+ Lowering production cost than rivals may pose a risk of incomparable quality of
products/services.
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+ Cost cut-down during production processes of products and services may
devaluate them or make it impossible to produce products and services with desired
quality.
+ Methods used for reducing production cost may be known and applied by rivals
in similar way to compete against the companies and then the competition would become
fiercer.
+ When the consumption market is in its saturated status, product price difference
shall be narrowed, and thus the competitiveness of this strategy would become less

effective.
+ Too much reliance on this strategy shall undermine other competitiveness
aspects of companies, particularly quality related strategy or business flexibility.
 Differentiation strategy
Product differentiation is a kind of competition strategy where companies attempt
to create the identity of a product or service from the same products or services offered
by their rivals in the market. This is to raise attention from and attract customers. Below
are some ways:
 Product differentiation
 Sale service differentiation
 Form of product demonstration
 Technology renovation
 Product prestige
 Manufacturing optimum
 Product usability
 Product superiority in the market
 Customer acquisition and sustaining
 Rival control
 Price advantage
 Acquisition of loyal customers
 Conditions for companies to follow the differentiation strategy:
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Differentiation in products or services created by companies shall make the
companies themselves highly appreciated by the market. However, to make it, companies
shall need to meet the following conditions:
+ Companies need to have excellent competence in R&D for the concerned
products and services. They also need huge investment capital buying technologies for
this important functionality.
+ Companies need to have a pool of skilled and qualified laborers, who are leading

experts and excellently creative professionals. This will require significant amount of
investment for human resources.
+ Companies need to have a proper management apparatus that encourages the
changes for the better, creativeness, and risk taking and enterprising minds.
 Challenges against differentiation strategy:
+ Have certain level of competence with regards to technologies, human
resources, R& D, and finance.
+ Rivals may have the same policies and/or methods in the market; therefore,
investment in human resources is always necessary.
+ In case rivals have excellently high level of specialization and good market
position, companies shall be hardly to surpass them by applying this strategy.
+ Using differentiation as a guide to enhancing competitiveness will require a
quite amount of investment, which may affect the company production performance.
 Focus or concentration
Driving from the product differentiation and production cost reduction, companies
may apply market focus strategy to sharpen their competitiveness. Market focuses strategy
targets at one market in a certain region or a group of customers. Some key points of this
strategy are as below:
+ Market focus strategy may go towards reducing production cost within a small
scale market, which is clearly defined.
+ Production differentiation: Market focus strategy means targeting at a market
section or specific customers to create and demonstrate a possible differentiation, product
and service superiority delivered by the companies.
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+ The choice of market focus is critical to demonstrating, exploring and
implementing competitive advantages in the selected market.
+ The choice of market focus shall also be demonstrated when companies set to
diversify their products. It can be seen that in order to obtain sensitivity and quick
responses in the market as well as to customers’ needs, many of the company focus their

business in a narrow market section or selected market.
+ This competitive strategy may also create disadvantages or risks since companies
concentrate too much on that selected market, thus, somehow losing their flexible control
when there is change to real market.

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CHAPTER II
TO BUILD THE OUTSOURCING STRATEGY AT AKZONOBEL PAINT VIETNAM
CO., LTD
2.1. An overview of AkzoNobel Paints Vietnam Co., Ltd.
2.1.1 About AkzoNobel Paint Vietnam Co., Ltd.
Full name: AkzoNobel Paints Vietnam Co., Ltd.
Transactional name: AkzoNobel Paints Vietnam Ltd.
Head office: 5th floor, Kumho Plaza Building, District 1, Ho Chi Minh City
Telephone: 38221612 Fax: 38241104

Subsidiaries:
 Northern Vietnam (Hanoi Chamvit Tower-Grand Plaza)
 Central Vietnam (Da Nang city)
 Me Kong River Delta, Can Tho province
2.1.2 The formation and development
AkzoNobel Paints Vietnam Ltd. is a 100% foreign invested company, under the
AkzoNobel Global based in Amsterdam, the Netherlands. In Vietnam, the company has
operating for 10 years now, specializing in producing and supplying paints and industrial
coatings.
At present, the company is extending its business to producing and supplying
decorative paints for civil construction and installations. These include water based paint
(WB), solvent-based paint (SB) and putty powder. The head office is located at 5
th

floor,
Kumho Building, District 1, Ho Chi Minh City and a factory in Binh Duong province. In
addition, the company has outsourced some of its products in order to meet the increasing
demand in different parts of the country, particularly in the north.
In 2008, the company has taken over the paints trade from the ICI Global. The merging
was completed in 2009, which has brought up the company as the world leading coating
producer.